The New Alternative Economic Systems (Part One)

The Emergence Of The Sharing Economy

Over the past few years, consumers have naturally developed, in the face of successive recessions, more rational purchasing reflexes. They have become more concerned about the relevance of their purchases and the social benefits they may have. More aware of the inequalities and the consequences of the enormous waste caused by the overconsumption of society, connected consumers are increasingly opting for platforms for the exchange of goods and services between individuals, without seeking to make profits and without intermediaries. And, if they choose commercial offer platforms, it is often in a context of collaborative economics and sharing. A new economic system is taking shape. It relies more on the pooling of goods, places or tools. And it is more geared towards use than acquisition. It is the sharing economy.

Already by 1994 – 1995, the giants of eCommerce (Amazon) and Ebay appeared, and the first collaborative platform were born. At the turn of the new millennium, platforms for the exchange of knowledge (Wikipedia), and sales of goods / services between individuals (Kijiji) were born. It is at the turn of the millennium, with the emergence of social media, that the first practices of couchsurfing and co-rent (Airbnb), and pooling of urban transport (Uber, Lyft) took root. Then, video and audio streaming subscription sites (Netflix, Soundcloud), and music (Spotify).

Further Disruption

In 2008, there was the arrival of Elon Musk, with Tesla. He focused more on disruptive technological innovations, such as electric cars. These shook the transport industry by offering a more economical and environmentally friendly solution. And these inspired several other initiatives around the world. We saw the emergence of movements of participatory financing (Kickstarter) and co-location of spaces and services on demand (WeWork). A new movement to save values and social impacts is gradually created with young entrepreneurs who have taken the lead in new startups.

At the same time, during all these years, some giants of the technos and the Web, like Google, Apple, Facebook and Amazon (GAFA) benefited greatly from their positioning to build and affirm their economic power. However, by early 2017, some companies in the new social sharing and impact economy, such as Netflix, Airbnb, Tesla and Uber (NATU) had a combined financial and / or market value of more than US $200 billion. And in 2016, more than US $450 million was invested in startups linked to the sharing economy.

Leveraging Independent Entrepreneurship and the Economy of Demand

The subsequent “uberization” of enterprises and services has had a tremendous leverage effect on the sharing economy.The effect also stretches to independent entrepreneurship and on-demand work. And it has given rise to a new Parallel economy of demand (Gig Economy). Currently, according to the Union Upwork / Freelancers, 24% of the US population is collecting income from the sharing and demand economies, with Uber, Airbnb and Etsy amongst the beneficiaries.

By 2015, more than 57 million self-employed workers (+/- 37 million) and self-employed workers, contractors and freelancers (+/- 20 million) were already employed in the United States. Together, these generated more than US $1,000 million. By 2020, it is estimated that they will account for more than 40% of workers. In Canada, in 2012, government statistics already showed more than one million small businesses with fewer than 100 employees, and 2.67 million self-employed. These accounted for more than 15% of jobs. In Quebec, this number is estimated at just over 750,000 people, with an increase of 4 to 5% per year until 2020.

The New Value Economy with Virtual Currencies

It was in 2008 that we saw another alternative economic approach emerge, with the cryptocurrency (Bitcoin) and the blockchains system. “Bitcoin: A Peer-to-Peer Electronic Cash System¨ a whitepaper by Satoshi Nakamoto, introduced the notion of saving values with blockchains. It is mainly a personalized ledger for the management and exchange of goods and services online. Cryptocurrency is transacted directly by peer-to-peer, thus avoiding the intervention of Intermediaries during the transaction.

Initially, this new alternative economic system took some time to gain ground because it did not offer sufficient tangible guarantees. And banking and financial institutions did not attach too much importance to it, presuming it to be a temporary phenomenon. However, two years later, when Lazlo Hanyecz launched on the discussion forums, he had just bought and paid a pizza with Bitcoins. And the value of the crypto currency quickly began to increase.

The Current State of Crypto Currencies

In the first quarter of 2017, Bitcoin traded at close to US $1,250 – more than gold. Six months later, its value already exceeded US $2,750 (CDN $3,450). Today, Bitcoin’s stock capital has topped US $20 billion, and almost all financial institutions are currently studying the potential of block chains. It is expected that the value-added economy will reach more than US $3.1 trillion by 2030, with the rise of other block chain systems such as Ethereum (the second largest virtual currency valued at more than $ 1 billion). However, to truly win consumer confidence, Ethereum (ETH) will still have to prove that it is more stable and secure – especially after being hacked to the tune of US $32 million recently.

Currently, it is estimated that there are already more than 600 different crypto currencies in circulation. The virtual currencies that will stand out will be those that will succeed in demonstrating stable growth, and that ensure their security. And, with so many different crypto and local currencies, converting from one currency to another will become a serious challenge.

The Mechanism of Block Chain Systems

Warning: Unless you are very technically minded, don’t read this part!

The open register of block strings is managed by the users’ computers. This makes it possible to store all relevant information. The goal is to validate and authenticate the nature of a peer-to-peer online transaction, according to the Smart Contract negotiated between the two parties. Each of the speakers in the file can access the source directly, and monitor activities and transactions online. And they can intervene in real time. It can track the sums of money invested and spent, and tie it to intellectual property.

Without going into the technical details which support blockchains, and which provide some stability, it is nevertheless a complex transaction management system. In real time, it is possible to monitor:

Each of the operations of a commercial transaction

Obtain the Proof of Work or the Proof of Stake

Those who created it and participated in the transaction

This data is then validated by the ¨Miners¨ group, which manages the powerful personal computers that support this decentralized system.

The databases that make up the registry file are distributed across the system. There can then be several copies of the same file that circulate at the same time. To modify this file, it would be necessary to obtain the authorization of all those who have access to it in the chain. For example, if someone wanted to compromise the integrity of a registry, they would have to modify all the files in circulation at the same time, which would ensure its security.

These registers can therefore be applied for several types of commercial transactions. And ¨Smart Contracts¨ could also eventually replace most peer-to-peer agreements.

How Powerful are Smart Contracts?

In an interview with Radio-Canada, Geoffroy Garon-Épaule explained:

¨In the world of transactions, in electronic commerce, it is a revolution. But [in the near future], technology will also be used to replace different registers. One could in particular marry on the blockchain, without using the intermediary of the Church or the State for the official contract of marriage.”

Note: This article is a part of the Raymond Morin’s upcoming book: Generation C – The Confluence Marketing at the Era of Connected Consumers that will be published next fall on Friesen Press.

To read part two of this article, titled “The Growing Importance of Blockchain Technology”, click here

Strategic analyst / consultant for over 20 years, specializing in optimizing Web marketing / social media for businesses and organizations, Raymond Morin is also the author of three reference guides (in French), and co-author of three other books about digital marketing, public relations and human resources management.
A recognized professional blogger, in both languages, he regularly presents and facilitates conferences for organizations, as well as in-house training workshops. In English, he contributes monthly to various platforms of professional bloggers and social media influencers.
His next book, Generation C - Confluence Marketing at the Era of Connected Consumers, will be published next fall on Friesen Press Publishing.